A referral is a marketing effort by inviting customers to recommend products to other potential consumers in their environment, it can be friends, family, or connections on social media. With referrals, it means that many people will buy the product. Especially if consumers tend to trust recommendations from people they know. One strategy worth trying is referral marketing.

Referral marketing can generate 3 to 5 times the conversion rate and has the opportunity to increase customer retention 37% higher than other marketing channels. Why can this marketing be considered as an effort to advance the business? Because referral marketing can increase sales, generate customer loyalty, create promotion cycles automatically, and collect lots of leads without having to hard sell.

Types of Referral Marketing You Can Try

Several types of referrals can be used, including:

1. One Way Incentives

One way incentive is a system by giving rewards for every product promotion activity that can be carried out for the giver or recipient of a referral.

Referrer

One way incentives on referrals are the most commonly found in the business industry. When a new user joins via the specified link, the referral will get a reward.

  • Pros: This type can maintain good relationships with customers and increase the retention rate from customers that are obtained through recommendations.
  • Disadvantages: promotions carried out by these referrers may appear insincere because they are very oriented towards the rewards of the referral program

Referred

There is also a type of referral that only gives gifts to consumers who buy your product through the referral program (referred). But the strategy may not have been found too much.

  • Pros: There will be more new customers that are obtained because of the lure of rewards. In addition, the promotion looks more natural because your product will be recommended without any reward at all.
  • Weaknesses: Because the referrer does not get a reward, then this system will only work if your product is good enough so that customers want to recommend the product voluntarily.

2. Two Way Incentives

A two-way incentive is a system that rewards both the referrer and the referred. This can be called a win-win solution for both. This type is starting to be widely used by various types of businesses.

  • Pros: The system of two-way incentives can increase the motivation to buy your product. even 81% of consumers are more interested if the brand has a reward program.
  • Disadvantages: You need to carefully consider the costs and types of incentives that will be provided such as discounts, gift cards, cash.

3. Milestone Reward

Milestone reward is a type of referral marketing with a certain achievement target. This system encourages referrers to share recommendations regularly so that they can reach certain activity levels and get prizes.

  • Pros: The desire to achieve a certain will increase the motivation of referrals. Finally, the opportunity to get new customers is getting bigger.
  • Weaknesses: It takes the right strategy so that customers consistently carry out promotions. Otherwise, the consumer may stop in the middle of the program.

4. Leaderboard Rewards

Finally, there is a reward leaderboard that offers ranking-based rewards. So, the referrer will carry out certain referral activities and get points that are accumulated and then calculated into a ranking.

Thus there are several rewards for different rankings according to the number of referrals successfully obtained.

  • Pros: Competition between referrer will motivate them to do more vigorous promotion.
  • Disadvantages: Referrers who are far behind can get bored and don’t continue the referral program.

Advantages of Using Referral Marketing

NoFor Companies

For Consumers

1Have a clear targetEarn commission on purchases
2Increase trust in consumersGet upgrade commission
3Get high reachGet click commissions via referrals
4Can be used for free

Tips for Implementing Referral Marketing

Whatever type of referral marketing you use, you have to maximize it with the following tips:

1. Promote Referral

Referral marketing will not run smoothly if it is not balanced with promotions. Fortunately, you can use the various channels you have to promote it. For example, MailChimp deliberately created a special landing page for the referral program. By using the main website, the program that is run will certainly become more credible. So, this can be a more convincing potential referrer.

You can also use other strategies on different channels such as paid ads in Google search results, content marketing by creating an interesting blog, or social media marketing with various posts through your official business account.

2. Building a Simple Referral Program

One of the reasons why referral marketing is less successful is because the process is complicated so create a very easy system so that the program can run more effectively. For example, you can prepare a special link or code for each customer that is easy to share with other people via WhatsApp, social media, or others.

Likewise, with rewarding, you should reduce the complicated procedure and make it automatic, for example by giving rewards directly to the application used by the referrer or referred. Currently, there are many referral software where you can set a unique code, the system to measure how successful your referrals are.

3. Leveraging Momentum

Take advantage of the annual event to hold a referral marketing program as well as tips that are worth trying. In addition, the event takes place at a certain time. Many people are certainly looking forward to this moment. If your business is in the fashion sector, then you can take advantage of religious moments such as Christmas, Eid al-Fitr, or Eid al-Adha. You can also hold this program during shopping events such as Harbolnas, Black Friday, or others.

4. Collaboration with Influencers and Brand Ambassadors

The focus of referrals is word of mouth. Can you imagine if the one who spreads your referral code is an influencer? The impact will certainly be greater, right?

That’s why you can try to collaborate with influencers to promote products with a referral system. But make sure you choose influencers that match the type of business and branding you are building.

With the help of an influencer, the more potential customers you can get through the program, right?

FAQ

What is the importance of referral marketing?

-Referral marketing is a marketing strategy that is closely related to the word of mouth marketing. This technique is powerful enough to reach more customers. The reason is, referral marketing does not only benefit the company. This marketing strategy also has a positive impact on customers.

What is meant by referral prospecting?

-Referral is looking for prospects by taking advantage of customers who are satisfied with the products/services offered. In other words, customers who are not satisfied with our products/services cannot be asked for help.

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